Americans currently pay around $100 billion in real estate commissions annually
The National Association of Realtors (NAR), which represents more than 1 million realtors, reached a $418 million settlement on claims that it conspired to maintain high commissions for agents on home sales. The deal will also likely reduce the nationwide standard commission fee.
The settlement prohibits agents’ compensation from being included on listings.
Typically, a home seller would pay a standard commission (between 5% to 6% of the sale price of a home) to their agent for listing their home on multiple listing services. The seller’s and buyer’s agents would split this commission, which critics say has artificially inflated housing costs.
The lawsuit argued that buyers and sellers were intentionally kept out of commission negotiations.
NAR faced severe legal threats, including a $1.8 billion verdict from a Kansas City case, prompting this settlement to resolve widespread legal exposure.
Americans currently pay around $100 billion in real estate commissions annually. Reducing this will have a significant impact on the housing market.
It is expected to
- Decrease real estate commissions by 25% to 50%.
- Save sellers between $6,000 and $12,000 on average-priced homes.
- Lead to more buyers opting out of using agents altogether.
- Open up opportunities for alternative models of selling real estate.
If approved by a federal court, the move will see at least 1 million realtors leave their jobs, according to investment banking firm KBW.
Fears of reduced business for real estate platforms led to stock declines of more than 13% on Friday for companies like Zillow and Compass.
The settlement would increase competition among agents in the housing market, allowing buyers and sellers to hunt for lower commission rates. As costs go down, experts anticipate an increase in homebuying activity.